Credit Cards

5 Great Reasons You Need a Credit Card

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Ryan Ong

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According to most finance magazines, you need a credit card like an anorexic needs liposuction. Plastic is the ultimate weapon of mindless consumerism, existing only to drain your wallet. Well, that’s just…70% true. But being a MoneySmart reader, you’re ahead of the curve. You’ve got more control than China’s domestic policy, and you know what you’re doing. Well in that case, here’s 5 great reasons to get a credit card:

 

1. You Have an Emergency Fund

No matter how careful you are with finances, emergencies will happen. Cars will break down, body parts will wear out, and computers will crash. Sometimes, they have to be replaced immediately. I once put off visiting the doctor for a week, and ended up sick for three months.

That’s how I learned crucial lessons; such as always having accessible cash (a credit card), and never assuming Kraft cheese expiry dates are exaggerated. Credit cards are especially vital when you’re overseas, and don’t have access to your various bank accounts. You don’t want to risk overstaying a Visa because you missed a plane flight.

 

Car breakdown, with man sticking his arm up in the air
“Can’t they see me sticking up my Visa? This is totally not like the ads!”

 

2. You Can Seize Opportunities

Stock traders and investors will know what I’m talking about here. It’s called “leverage”, and it doesn’t just work in stocks and shares.

Let’s say you’re walking down Orchard Road, and you see a sports bag you’ve always lusted for. It’s going for half price, but for today only. If you haven’t got the cash for it, that’s an opportunity you’re losing. If you buy it for full price later, your lack of a credit card just cost you money. 

Likewise, don’t underrate your card’s ability to affect your business. If you’ve got to meet an important person for lunch, being able to choose any location has a big impact.

 

Guy holding up a "for sale" tag attached to a key
“My car, half price, right now. I won’t ever be this drunk again.”

 

3. It Builds Your Credit History

If you don’t use a card at all, you have no credit history. That’s almost the same as bad credit history. The banks tend to believe everyone’s scum until proven otherwise. So if you use and repay your credit cards responsibly, you may find their loan officers more accomodating.

The next time you want approval in principle, or you need an urgent loan, your credit card history may get it for you. Of course, the downside to this is that you have to maintain good credit. Start missing repayments and the credit card becomes a hindrance.

 

Man talking to an older man at the bank
“For the last time dad, I can’t approve your loans! Stop coming to this bank branch!”

 

4. Rewards and Discounts

I’ve already covered how rewards and discounts determine the right credit card for you.

If you follow my advice on that, credit cards can save you money. Think of credit as fire. It can burn you, but it’s far more difficult to live without it. It’s simple logic that, by using the right credit card for the right product, you will pay less. Either through a rebate or a discount.

Just so you know, I sometimes give the money to friends and ask them to buy things on their card. Just to net them points, or to get myself a discount. Having my own credit card makes it that much easier.

 

Car with a basket on the boot
“No, no, I wouldn’t blow the kids’ college fund on a car! The hamper was the purchase, and the car was the points reward. Yeah, that’s it!”

 

5. It Creates Cash Flow

If you’re operate a side business or small business, you’ll know how important cash flow is.

It’s not always how much you’re owed, it’s how much you have on hand that counts. Someone might owe me $800, but if I have to pay $400 rent right now, then what? How many times have you heard this:

“I have no money, but wait, there’s a guy who should probably pay me sometime soon.”

That’s the sort of excuse that plants a landlord’s boot so far up your rear, your doctor will be hunting for shoelaces during the surgery. When there’s no cashflow, things like late fees start coming into the equation. Or even worse, severed phone lines and power cuts.

Credit card interest may hurt, but it’s less painful than dealing with failed cash flow. In fact, I’d say it’s mandatory to have one if you run a side business.

 

MArtial arts demonstration
“Feel the chi flow through you, like your enrolment cash flows into my wallet. That was a hint.”

 

Bankruptcy Fears

Not using a credit card because you fear a “lack of control” isn’t a valid argument. That’s like forever refusing to cross streets because there’s a chance of an accident. Getting and using a credit card is part of the process of financial maturity. And here’s the kicker: The people who are paranoid about overspending…are the ones least likely to do so.

 

Choosing the Right Card?

Having said all that, it’s important that you choose the right credit card so you can benefit the most. If you do take the plunge, drop by free sites like MoneySmart.sg. Enter the type of credit card you’re looking for under the categories menu, and you’ll be able to view and compare credit cards from all major banks. Set up one-to-one comparisons, and apply directly for cards that interest you.

Image Credits
Andres RuedaandrijbulbaskippyjonaflcionechbiEdward DelMulderImages_of_Money

Do you have any fears about getting a credit card? Comment and let us know! 

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Ryan Ong

I was a freelance writer for over a decade, and covered topics from music to super-contagious foot diseases. I took this job because I believe financial news should be accessible and fun to read. Also, because the assignments don't involve shouting teenagers and debilitating plagues.